The Global Economy Modest Improvement

Transcription

1 Title line 1 Title line 2 The Global Economy Modest Improvement Name David Katsnelson, Director Title, date RISI Macroeconomic Service 3 June,

2 Agenda 1. Global Snapshot 2. China 3. External Environment with Focus on USA and Europe 2

3 Global Economy Growing Unevenly Annual Real GDP Growth Euro Area USA -0.4% 0.9% 1.5% 1.8% 2.3% 2.4% 2.6% 3.0% China Latin America 7.7% 7.4% 6.9% 6.7% % 1.3% 0.8% 2.3% Source: IMF, RISI 3

4 Developed Economies Leading Global Growth Global Real GDP* Growth 6% 5% 4% 3% 2% 1% 0% -1% -2% *Measured at purchasing power parity exchange rates Source: IMF, RISI 4

5 While Emerging g Markets Have Slowed Annual Real GDP Growth 20% 15% Brazil India South Africa Russia China 10% 5% 0% -5% -10% Source: IMF, RISI 5

6 Emerging Economies Dependent on US and EU Demand Year-over-Year Percent Change 30% 25% 20% 15% 10% 5% 0% -5% -10% 15% US Real Imports -15% EU Real Imports -20% -25% Emerging Asia Ind. Prod

7 Oil Prices Staying Lower for Longer Brent North Sea Crude Oil; US Dollars, Euros per Barrel Brent Brent $ Copyright 2014 RISI, Inc. All rights reserved. Source: Energy Information Administration, RISI 7

8 China in Transition Economy undergoing major restructuring Investment-led growth to consumer-based growth Trade still important, supporting economy in the near term Days of 9-10% growth in the past Financial liberalization Monetary policy now becoming more accommodative Interest rate cuts and RRR cuts to support growth Targeted support for key industries, especially real estate Greater regulation of shadow banking Debt has become an issue Increased volatility for renminbi 8

9 Consumption Needs to Be Increased Household Consumption and Fixed Asset Investment as Percentage of GDP Consumption FAI

10 Trouble Brewing Debt, Percentage of GDP, Second Quarter Government Corporate 64 Household 36 Financial Sector

11 But a Debt Crisis is Unlikely Foreign Reserves, Million USD; Foreign Debt, Percent of GDP 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Foreign Reserves Foreign Debt

12 Overcapacity Slowing Investment and Production Fixed Asset Investment, Year-over-Year Percent Change; Industrial Production, Year-over-Year Percent Change 50% Industrial Production Growth Y/Y 40% Fixed-Asset Investment Growth Y/Y 30% 20% 10% 0% -10% Source: PBC, CEIC 12

13 Real Estate a Major Risk for the Economy Real Estate t Climate Index, 2000=100; Floor Space Under Construction, Buildings Sold, Year-over-Year Percentage Change RECI (L) Floor Space Under Construction ti (R) Buildings Sold (R) 100% 80% 60% 40% 20% 0% -20% -40% Source: CEIC 13

14 Monetary Policy Becoming More Accommodative New Bank Loans, Aggregate Financing, Billion Renminbi; Money Supply, Year-over-Year Percent Change 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Bank Loans Aggregate Financing Money Supply (R) % 35% 30% 25% 20% 15% 10% 5% 0% Source: NBS, Dragonomics 14

15 Overall Trend of Trade Is Down Exports and Imports, Year-over-Year Percent Change 100% 80% Exports Imports 60% 40% 20% 0% -20% % -60% Source: China National Bureau of Statistics, CEIC 15

16 Recent Export Numbers Improving on Higher US Demand Exports and Imports, Year-over-Year Percent Change 60% 50% 40% 30% 20% 10% Exports Imports 0% -10% % -30% Source: China National Bureau of Statistics, CEIC 16

17 Industrial Imports Remain Strong Three-Month Average of Imports by Quantity, Index 2005 = Iron Ore Copper 300 Crude Oil Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan Source: CEIC

18 China s Economic Reforms Slow Growth Real GDP Growth, Annual Percent Change 14% 12% 10% 8% 6% 4% 2% 0% Source: NBS, RISI 18

19 Increasing Volatility for the Renminbi CNY/USD Source: Fed, RISI 19

20 The USA and Europe Copyright 2014 RISI, Inc. All rights reserved. 20

21 The USA USA Accelerating US economic growth has been slow Different recession, different recovery But is improving Employment and wage growth Manufacturing Cheap energy Housing 21

22 2014 Job Growth Best Since 1999 Change in US Total Payroll Employment, Millions Annualized Source: Bureau of Labor Statistics 22

23 Consumption Growth Helping Drive US Economy Real Consumption Expenditure, Annualized Percentage Change; Unemployment Rate 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% Consumption Unemployment Rate Source: Bureau of Economic Analysis, RISI 23

24 Manufacturing Weakness in Near Term, But Continues to Support Economy Index of Industrial Production, Jan 2000 = 1.00; PMI Industrial Production PMI Source: Federal Reserve, Institute for Supply Management 24

25 Low Natural Gas Prices Helping US Manufacturers Landed Prices of LNG January 2015, Dollars per MMBtu $8 $7 $6 $5 $ $3 $ $1 $0 Source: Federal Energy Regulatory Commission 25

26 Dollar Stronger on Expectation of Rate Hike and Stronger Growth Trade Weighted US Dollar Index: Major Currencies, March 1973 = Source: Federal Reserve 26

27 US Economy Showing Consistent Growth Real GDP Growth, Annualized Percent Change 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% -7% -8% -9% Source: Bureau of Economic Analysis, RISI 27

28 Europe From Crisis to Malaise to Growth? The Positives Growth positive, although still weak Oil Prices and the euro Bank lending declining The Negatives Some economies still contracting Risk of deflationary spiral Debt ratios worsening Unemployment remains high The Risks s Greece Russia Quantitative Easing 28

29 Eurozone Growth Improving Annual Real GDP Growth Germany France Italy UK Eurozone Source: IMF, RISI 29

30 Sentiment Indicators Have Improved, And Consumer, Industrial Confidence Consumer Industrial Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 30

31 Some Hard Data Following Industrial Production Indices, January 2010= Euro Area Germany France Italy Source: Eurostat 31

32 Bank Lending Stabilizing Bank Loans to Households and Non-Financial i Corporations, M3, Year-over-Year Percent Change 20% Non-Financial Corporations Households 15% Money Supply 10% 5% 0% -5% Source: ECB 32

33 Unemployment Still a Problem Harmonized Unemployment Rate 28% 26% Eurozone Germany Greece Spain 24% France 22% Portugal 20% 18% 16% 14% 12% 10% 8% 6% 4% Italy Source: Eurostat 33

34 QE What Is It? Will It Help? What is it? ECB will purchase 60 billion of bonds every month Open-ended Increase balance sheet by at least trillion What will it do? Put pressure on the currency Hopefully increase inflation Hopefully increase bank lending Will it help? Yes, but only marginally Complex arrangement Problematic transmission channel 34

35 Euro Weakness Versus Dollar on Continuing ECB Action $1.60 $1.50 $1.40 $1.30 USD/EUR $1.20 $1.10 $1.00 $0.90 $ Source: Fed, RISI 35

36 Conclusions Slower growth for emerging markets, but no crisis China s growth will be an important driver for other emerging economies Monetary policy becoming more accommodative in China Dollar-denominated debt a risk for emerging economies US economy accelerating Employment and low energy prices help spending Housing and manufacturing key drivers of economy Europe growing, g, but slowly Potential growth rate is lower QE may help somewhat Deflation is here, but may be temporary Sovereign debt crisis in remission, but risks remain Overall, some improvement 36

37 Thank you for your attention! For more information: Monthly Economic Commentary 37